Payment Calculator>Loans: Terminology and Definitions
- Type: You can either choose to calculate a loan with an amortization schedule or a lease-purchase sale which is similar to a rent to own type of sale.
- Enter In Sale Price: This is the agreed sales price for the property, or in other words, what you are selling the property for.
- Enter Down Payment: This is the down payment that the buyer puts down at the start of the loan… this amount reduces dollar for dollar the amount financed before the loan is amortized.
- Enter Annual Property Tax (If applicable): When you owner finance a property, you always want to pay the taxes on behalf of the buyer, therefore the annual property taxes are included in the calculation to determine the monthly payment amounts as well as the four-month tax reserve due at closing.
- Enter HOA/POA (If applicable): If the property has HOA (Home Owners Association) or POA (Property Owners Association) dues, then you want to enter in the annual amount due. Just like the property taxes, you will want to pay any HOA or POA dues on behalf of the buyer and that is factored into the monthly payment amount.
- Enter Doc Fee (optional): A doc fee is like an administrative fee to conduct the transaction. You can think of it like the fee you would pay a title company to transact a cash sale. It is paid to you at closing but not applied to the loan balance. It is industry standard to charge $500 for this fee.
- Enter Interest Rate (optional): The interest rate is used to calculate the interest portion of the payment and it is amortized over the term of the loan. If you are not going to charge an interest rate you can enter in 0 to calculate the loan as a 0% interest loan. Since banks do not typically lend on land the interest rate on land does not follow the rates on houses. It is quite typical to charge a 12.9% rate on land even if financing on houses is at 3%.
- Enter Monthly Loan Service Fee (optional): The serving fee is an administrative fee for serving the loan. It is factor into the monthly payment however it is an amount in addition to the amounts applied to principal, interest, and impound. Think of this as compensation for the administration effort required from you to manage the loan. It is industry standard to charge $18 to $20 for this fee.
- Enter Term (optional): This is the number of months the loan is amortized over, or in other words, this is how many months it will take for them to pay off the loan assuming they pay the minimum amount due each month. If you leave this field blank the system will determine the loan term for you. Or you can enter in your own term and the calculator will adjust accordingly. Keep in mind the lower the term the higher the payment will be and the faster the buyer will be paying off the loan.
- Sales Price: This is the agreed sales price for the property, in other words, what you are selling the property for.
- Down Payment: This is the amount that the buyer puts down at the start of the loan which reduces dollar for dollar the amount financed before the loan is amortized.
- Doc Fee: This is the administrative fee to conduct the transaction. You can think of it like the fee you would pay a title company to transact a cash sale. It is paid to you at closing but not applied to the loan balance.
- 4 Month Reserve: This is the annual property taxes plus any HOA/ POA annual dues summed up and divided into a monthly impound amount, multiplied by four. The reason we charge this at closing is to accelerate the amounts in the reserve/impound account that are set aside to pay the annual property taxes and HOA/POA dues on the buyer’s behalf in case these amounts fluctuate over the loan term or they are due before the account is fully funding by the monthly inbound amounts. Or in other words, we are over funding the impound reserve account to prevent funding issues that may or may not occur in the future. Any amounts paid into the reserve impound account in excess should be returned to the buyer once the loan has been satisfied and title transferred to the buyer.
- Total Due Today: This is the total amount the buyer will need to pay at closing in order to purchase the property with the financing.
- Amount Financed: This is the amount the buyer is financing with you over the term of the loan.
- Interest Rate: This is the interest rate is used to calculate the interest portion of the payment and it is amortized over the term of the loan.
- Monthly Payment: This is the base monthly payment which includes the principal and interest portion of the payment.
- Monthly Impound Amount: This is the annual property taxes and any HOA/POA annual dues split up by month. These funds are set aside to pay the property taxes and any HOA/POA annual dues each year on behalf of the buyer.
- Loan Term: This is the number of months the loan amortized over. In other words, the number of months it will take the buyer to pay off the loan assuming they only pay the minimum amount due each month on time.
- Monthly Loan Service Fee: This is an administrative fee for serving the loan.
- Total Monthly Payment: This is the minimum amount the buyer will need to pay you each month. This amount includes the principal, interest payment, monthly impound amount and loan serving fee that is due each month.
- Pay Day: This is the day of the month that the payments are due. Typically this is set to 1 which is the 1st day of the month
- Per Diem: This is the amount owed on a per day basis this is used if someone asks for their payoff amount but they can’t pay for a few days, in that case you would give them their Payoff amount and Per Diem amount and let them know to tack on the Per Diem amount for each day beyond today to the Payoff amount so that they send in the correct amount.
- Bring Current Amount: This is the amount that the person owes at any given moment it includes any outstanding payments as well as any outstanding fees.